As India-China face off, big projects may be scrapped

S Ronendra Singh New Delhi | Updated on June 18, 2020

The first casualty when two countries face-off between is trade and business, so it is not surprising that caught in the crossfire between India and China is business and big projects.

A veiled threat

With the growing demand for boycotting or banning Chinese products, the government also seems to be sending a veiled threat by indicating the cancellation of some big projects, which have either Chinese investments or participation of Chinese firms.

For instance, the Dedicated Freight Corridor Company Limited (DFCCIL), a subsidiary of Indian Railways, has decided to terminate a ₹471-crore railway signalling and telecommunication contraction the Eastern Freight Corridor (the World Bank funded project), which started in 2016,citing tardy progress. The system contract was awarded to Beijing National Railway Research and Design Institute of Signal and Communication Group Company in June 2016.

The reason cited for the termination of contract was that just 20 per cent progress was made, although four years had passed after the project was commissioned. The issues cited by DFCCIL include reluctance to share the logic design of electronic interlocking, unavailability of their engineers at the site, and lack of tie-up with local agencies.

However, from the government’s side, there has been no communications to the companies or government undertakings on banning or stalling any of the projects where a Chinese company is involved.

Similarly, the State-owned Bharat Sanchar Nigam Ltd (BSNL) or MTNL have no communication yet from the government on banning Chinese companies such as ZTE or Huawei to participate in future tenders.

Future projects

“As of now, there is no order from the government to us so I cannot decide anything. As and when a government order comes, we will abide by it,” PK Purwar, Chairman and Managing Director, BSNL, told BusinessLine. However, sources from DoT said that it would soon direct state-run companies as well as private firms on cancelling future projects with Chinese vendors.

The developments come after the violent clash between soldiers of India and China in Galwan Valley in Ladakh, leading to escalation in tensions between the two countries.

Apart from telecom companies, companies in the wind and solar energy have also not gotten any order from the government on banning Chinese companies from participating in their projects.

“Till now, there has been no explicit directive to ban Chinese companies from participating in projects. But restrictions are already in place to prevent them from contesting in sensitive tenders from a national security perspective,” said a company involved in power transmission.

Chinese companies are not allowed to bid in tenders, such as the ones for supervisory control and data acquisition (SCADA) in power transmission projects, the official added.

In the Budget 2020, the Centre had proposed a 20 per cent levy of basic custom duty on import of solar cells and modules.

“This levy is expected to kick in after the safeguard duty on solar imports will lapse in July 2020. This will be an extended effort to reduce reliance on imports for meeting needs of renewable energy projects,” said a sector watcher.

According to analysts tracking these sectors, there is no immediate decision expected from the government, as many projects are under way with Chinese firms. For instance, in the telecom sector, companies such as Bharti Airtel and Vodafone-Idea are heavily dependent on Chinese vendors – Huawei and ZTE. They cannot stop work with these vendors suddenly as that will have a serious impact on the networks.

For the railway sector also, products such as signalling, telecom and coaches are sourced from China, not just directly but indirectly also through sub-vendors.

Sources from a Metro Rail company wondered the extent to which this (banning sourcing of products from China) is implementable. Globally, till the pre-Covid-19 phase, India has been one of the largest railway equipment markets after China.

(with inputs from Mamuni Das and Twesh Mishra)

Published on June 18, 2020

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